Price Agreement

Price Agreements occur when the manufacturer of the specific brand is also one of the retailers. Price agreements will occur between 2 or more retailers provided that one is the manufacturer. Price agreements do not occur between any number of retailers as long as one of them is not the manufacturer.

The two cases to consider are 1) why would the manufacturer allow a lower retail price than his own retail, and 2) why would a retailer charge more than the manufacturer's retail price?

Neither is very practical.

1) If I'm the only supplier of eggs, and I retail them for $5.00, I would not tolerate my competitors selling my own brand of eggs for only $3.00 because that would be taking significant number of sales away from my store. The internal sale setting being off states that my business has already decided it's okay for competitors to sell my eggs. So, rather than me stopping my supply to them every time they lower their price for my eggs, it's logical to have an automatic arrangement where they cannot sell my eggs for less than I do.

2) The other end is that it is not usually sound for an external retailer to be charging more than the manufacture's retail price. Keep in mind that the products have the same quality and brand rating, so the price component is the only marketing tool that doesn't also affect the manufacturer's overall rating.  A higher price guarantees a lower overall rating than the manufacture's store.  Even if a small price increase were to earn some additional revenue for the time being, there is a risk that the manufacturer can lower it's price to make the higher overall rating look even worse to customers.

The price agreement feature prevents micromanagement for human players in both cases.

There is a way around price agreements, which is by re-branding via a private labelling unit.